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IR35 tax reforms in the private sector; what do the experts think?

14/08/18 | Advice & Guidance, Business, Limited Company, Tax Advice

There is a lot of discussion being passed about whether HMRC should be reconsidering their plans to extend IR35 tax reforms into the private sector. With many arguing the existing status-checking tool isn’t fit for purpose and ‘short-sighted’, the pressure is high for HMRC to reassess their methods and scrap its ‘unfit’ assessment method.

April 2017 saw the new IR35 tax reforms for the public sector and in May 2018 HMRC published talk of off-payroll working and addressing compliance with off-payroll working rules in the private sector and the discussion has since closed as of 10th August. Since the conclusion of this, many evaluations of the existing system have been conducted and proposed improvements have also come to light.

Existing HMRC figures suggest that only 10% of Personal Service Companies that should be applying the legislation, do. By 2022, the cost of non-compliance is expected to rise from £700 million (2018) to £1.2 billion which only highlights the sufficiency of the current process. Qdos Contractor CEO Seb Maley has expressed his disapproval on the matter. “The government must prioritise sorting the chaos caused by the public-sector reform before moving onto the private sector. Should the government press on with changes regardless, a 2019 rollout would be premature.” Qdos encouraged HMRC to “delay reform until employment rights and tax are aligned, affording contractors the protection they should be entitled to.”  To extend reform when the dust clearly hasn’t settled on public sector would be short-sighted” said Maley.

Many have branded CEST as an oversimplified source of a complex area with just 16 questions being asked in its’s service despite recommendations being up to 100. Qdos Contractor further state that “unless HMRC can disprove the substantial evidence demonstrating CEST’S shortcomings, then it’s clear that CEST is not fit for purpose”. With CEST being deemed incapable in many aspects by experts around the field, there is a lot left to be done by HMRC before others feel any progressions can be made towards extending IR35 tax reforms to the private sector.

With many recommending HMRC to hold fire and not go forward with any plans, it is unclear whether the advice will be considered and how this will influence the implements that have been listed for the private sector.

For more information contact the Sidekick team.

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